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HCP Inc (NYSE:HCP)
Q3 2019 Earnings Call
Oct 31, 2019, 12:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to Healthpeak Properties' Third Quarter Financial Results Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]

At this time, I'd like to turn the conference call over to Barbat Rodgers, Head of Investor Relations. You may begin.

Barbat Rodgers -- Head of Investor Relations

Thank you, and welcome to Healthpeak's third quarter financial results conference call. Today's conference call will contain certain forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, our forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our expectations.

A discussion of risks and risk factors is included in our press release and detailed in our filings with the SEC. We do not undertake a duty to update any forward-looking statements. Certain non-GAAP financial measures will be discussed on this call. In an exhibit of the 8-K we furnished with the SEC today, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. The exhibit is also available on our website at www.healthpeak.com

I will now turn the call over to our President and Chief Executive Officer, Tom Herzog.

Thomas M. Herzog -- President and Chief Executive Officer

Thank you, Barbat, and good morning, everyone. With me today are Pete Scott, our Chief Financial Officer; and Scott Brinker, our Chief Investment Officer. Also here and available for the Q&A portion of the call are: Tom Klaritch, our Chief Development and Operating Officer; and Troy McHenry, our General Counsel and

Chief Legal Officer.

Today, we are excited to announce that we are changing our name to Healthpeak Properties, effective immediately. Our common stock will begun trading under our new ticker PEAK on the New York Stock Exchange, at the start of trading on November 5th. Also redesigned our corporate website, which you can find as healthpeak.com. I think you will find the site more user friendly and easier to navigate with enhanced information about the company and our portfolio.

Why Healthpeak? Word Health, of course, communicate the sector in which we invest and operate [Indecipherable], and also our position as one of the country's premier REITs [Indecipherable] concepts of focus, stability and high quality.

Today marks the beginning of a new chapter. Change in our name represents the combination of efforts to reposition our strategy, team, portfolio and balance sheet. Healthpeak, we believe in the power of clarity and a simple strategy, unwavering focus and delivered actions enable consistent delivery on our vision.

Over the past few years, we've been more disciplined in our investment approach with a focus on the three primary private pay healthcare segments of life science, medical office and senior housing. As an innovative company at the forefront of providing high quality real estate of the evolving healthcare industry, we are committed to delivering value to our shareholders, customers and employees. Our shareholders, we now have a much improved and more focused portfolio that we expect to produce high-quality cash flows, consistent earnings and generate strong dividend growth over time.

For our customers, including tenants, partners, operators and senior residents, provide sustainable properties in strategically selected markets, we have some [Phonetic] modern amenities, state-of-the-art design, great locations and accessibility. And for our employees, we are fostering an innovative and collaborative culture where leadership is accessible and people have the necessary tools and resources to develop their own leadership skills to make a positive impact. We've worked hard to create an environment that attracts and retains top talents by offering the opportunity to build a lasting and rewarding crew at Healthpeak.

To support the successful execution of our strategy and vision, we are also announcing key leadership promotion, Scott Brinker, in addition to his role as Chief Investment Officer, will be promoted to President. Scott's exceptional talent and the industry expertise has contributed to the successful repositioning of our portfolio. In this expanded role, he will assume operational oversight of Healthpeak's three business segments, he will continue to be responsible for enterprisewide investments and portfolio management. This structure will enable better strategic alignment across our businesses, accelerated decision making and continued portfolio optimization. Scott's promotion will allow me more time to focus on the strategic direction of our company, our key relationships and our culture. Look forward to continuing to work closely with Scott for years to come.

Jeff Miller will be promoted to Executive Vice President-Senior housing. He has been instrumental in developing the senior housing team, improving the portfolio and implementing systems and data analytics across the senior housing platform. In this elevated role, Jeff will have full oversight and execution of the senior housing segment.

Lisa Alonso will be promoted to Executive Vice President and Chief Human Resources Officer. Lisa has done an outstanding job transforming HR function, rebuilding our team and cultivating a people first culture and will continue to oversee all human resources activities, while expanded leadership of our ongoing efforts to attract and retain top talent that makes Healthpeak employer of choice.

Finally, Barbat Rodgers, who led up our call today has been promoted to Senior Director and will be leading Healthpeak IR effort going forward. Andrew Johns, who has done a great job as Head of IR over the last three years has been elevated to lead our FP&A team. I want to extend my congratulations to Scott, Jeff and Lisa, as well as Barbat and Andrew on their promotion.

Turning to operations. We had another busy quarter with several important transactions announced for close that will continue to strengthen our portfolio. Senior housing, we've announced over $1.4 billion in acquisitions year-to-date, serve [Phonetic] to diversify our operator mix, improve our geographic footprint and expand our relationships with top-tier partners.

We also made significant strides in completing the final steps of our restructuring effort. First, we announced a series of transactions that will ultimately reduce our Brookdale concentration to just under 6%. First, [Indecipherable] 1st announcement related to our CCRC portfolio and our Brookdale triple net lease portfolio and the joint venture transaction with the sovereign wealth fund that we announced yesterday related to our Brookdale SHOP [Phonetic] portfolio. Second, we closed the previously announced sale of the Prime Care portfolio, legacy direct financing is structured. Finally, we completed our path to exit the UK signed an agreement to sell our remaining 49% interest to Omega Healthcare, which we expect to close by year end.

In life science, we further expanded our Boston presence through the acquisition of 35 CambridgePark Drive, bringing our total investment in the Boston market to $1.2 billion, collected a yield of 6% plus, inclusive of the 101 CambridgePark Drive development projects. Additionally, our approximately $1 billion life science development pipeline in South San Francisco, San Diego and Boston will provide incremental earnings growth as we head into 2020 and 2021, along with strong NAV accretion.

In medical office, our proprietary development program with HCA continues to provide us with accretive growth opportunity. Yesterday's announcements of two new developments, our active HCA pipeline totaled seven projects represented approximately $145 million of development spend. And we also have a number of additional projects that we expect to announce in the coming months under the HCA program.

So, our momentum remains positive on a variety of fronts. We completed a number of important strategic transaction, earnings in SPP are performing at or above our expectation. Developments in deal pipelines remain robust and our infrastructure continues to improve.

Now, I will turn the call over to Pete.

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Thanks, Tom. Once again report a solid quarter of operating and financial results. All three of our core segments continue to perform at or above our expectation. Third quarter, we reported FFO as adjusted of $0.44 per share and blended same-store cash NOI growth of 2.4%. Year-to-date, our same-store portfolio has delivered 3.1% growth.

Let me provide some details around our major segments. Starting with life science, which represented 29% of our SPP pool. The momentum we established in the first half of the year continued into the third quarter with same-store cash NOI growing 5.8%, brings our year-to-date same-store growth 6.3% and it's a reflection of the continued tenant demand for high-quality space and the three most important life science market. On the leasing front, year-to-date we have executed over 1.2 million square feet of leases, including 390,000 square feet in the third quarter. We signed 114,000 square feet of renewals during the third quarter at an average cash mark to market of positive 50%, bringing our year-to-date cash renewal spread to positive 25%.

Turning to medical office, represented 39% of our SPP pool. Third quarter cash NOI grew 2.5%, bringing our year-to-date growth to 3.3%. As we discussed on prior calls, in addition to higher occupancy and contractual rent escalator growth in the first two quarters of the year benefited from outsized add rents at our Medical City Dallas campus. Accordingly, we expected some deceleration in our same-store growth rate during the second half of 2019. Our year-to-date retention rate remains about 80%, which demonstrates the consistent level of tenant demand for our on-campus portfolio of assets.

Turning to senior housing, of which triple-net represent 16% and SHOP 10% of our SPP pool. Third quarter cash NOI declined 1.3% with triple-net growing 1.9% and SHOP declined 6%. Given the small size of our SHOP pool, the decline equates to just over $1 million. Year-to-date, our senior housing portfolio has met our expectations, triple-net growing positive 2.2% and SHOP declining 4.7% in line with the components to our guidance we provided at the beginning of the year. Portfolio mix between triple-net and SHOP has shifted because of triple-net asset sales and results in a blended year-to-date decline in senior housing of 0.5% on track with our expectation.

Turning to the balance sheet, in December, we announced a $1 billion unsecured commercial paper program providing an incremental source of attractively priced short-term floating-rate financing. As of October 29, we had approximately $650 million of commercial paper outstanding and a weighted average rate of 2.2% and roughly $71 million outstanding on our revolver. We ended the quarter with net debt-to -EBITDA of 5.8 times, which is in line with our targeted range. In October, Fitch recognized our meaningful balance sheet and portfolio repositioning progress with an upgrade to BBB+, we are now rated BBB+, Baa1 by all three of the major rating agencies.

A quick note on sources and uses, given our recent transaction activity. We ended the quarter with approximately $570 million of forward equity remaining. Yesterday's announcements of our senior housing joint venture and UK joint venture sale, we expect another approximately $450 million of proceeds by year-end, giving us total sources of approximately $1 billion, planned to utilize these proceeds to fund our announced $333 million purchase of 35 CambridgePark Drive expected to close in early December. Fund $225 million net for the Brookdale CCRCs and triple-net transaction expected to close in the first quarter of 2020.

Fund, our remaining 2019 development, redevelopment and capital spend estimated at approximately $200 million and use our floating rate debt, allowing us to end the year with net debt-to-EBITDA of 5.6 times, 5.7 times. From a balance sheet perspective, we are in a strong position to take advantage of the accretive opportunity in front of us to give a robust acquisition pipeline and attractive development and redevelopment pipeline and we are well positioned in both the debt and equity market as we head into 2020.

Turning now to guidance, we are increasing the midpoint of our FFO as adjusted guidance to $1.76 per share from $1.75 per share. In addition, we are increasing the midpoint of our blended SPP guidance to 2.75% from 2.5%. Update to both guidance ranges are driven by fine-tuning our expectation in our life science and medical office segments. Senior housing remains on track with our expectations.

One final bookkeeping item, on page 27 of our supplemental, we added a table outlining the material near-term purchase option and our portfolio. I hope you find this new disclosure useful.

With that, I would like to turn the call over to Scott.

Scott M. Brinker -- Executive Vice President and Chief Investment Officer

Okay, thank you, Peter. Third quarter was highly active across all three business segments. Closed more than $500 million of strategic field acquisitions including Oakmont in senior housing and Hartwell in life science. We also entered into new agreements or $900 million of acquisitions to expand our life science footprint in Boston and to continue transforming our senior housing business.

Under contract to acquire 35 CambridgePark Drive, a brand new life science property in West Cambridge, that's next door to the property in land parcel that we acquired in January. Purchase price of $333 million is a 4.8% cash cap rate and a 5.7% GAAP cap rate. Including the future development project, this campus will have approximately 450,000 square feet, a blended stabilized yield 5.6%. Campus is directly adjacent to Alewife station, a transportation hub with more than 10,000 passengers each day. So this Class A campus has outstanding accessibility and the rents are at least $20 per foot cheaper than East Cambridge where the vacancy rate is near zero.

We added two on campus medical office buildings to our development partnership with HCA, the nation's leading for-profit health system. Total spend is $34 million with 50% pre-leasing and a blended return on cost of 7.1%. These MOBs allow HCA to expand their outpatient capacity in core markets. We're typically developed in tandem with HCA investing significant capital into the adjacent hospitals, taking these strategic locations. That was an avalanche of positive activity in senior housing. Of course, in the end, we complete transformation of the portfolio and platform.

As announced on October 1, we agreed to a series of transactions with Brookdale, which are neutral to slightly accretive to earnings, assuming no change in leverage, we expect to close in the first quarter of 2020. Background since 2014, Healthpeak and Brookdale have been joint venture partners in 15 property CCRC portfolio managed by Brookdale. Healthpeak will acquire Brookdale's interest in 13 of those CCRCs for $541 million. That's a slight increase from the October 1st announcement, because we recently came to an agreement to add the 740 unit CCRC in Bradenton, Florida to help HealthPeak acquisition pool. The updated presentation is available on our website.

This is a unique and differentiated portfolio. Campuses include nearly 600 acres of land, which today would be virtually impossible to recreate. That scale allows the properties to offer unmatched amenities and significant expansion opportunities. Massive scale in the CCRC creates barriers to entry. There has been zero new CCRCs supply within 10 miles of these properties in the past 10 years. Residents typically enter CCRCs around age 80, which positions these assets to capture the earliest wave of aging daily rooms [Phonetic]. Finally, the average length of stay is 8 years to 10 years. Resident turnover is very low.

Investment also allows us to grow with LCS, a well-known and well respected brand with a 50-year track record. LCS is the largest operator in the CCRC industry and an excellent addition to our family of partners. Part of the transaction, Healthpeak will sell 18 triple-net properties to Brookdale for $405 million. This will materially improve the quality of our triple-net lease with Brookdale. However, the asset quality and rent coverage will increase and we'll move from having 11 separate these pools with various maturity date. The single master lease with an 8-year term. Yesterday, we announced an agreement to sell a 46.5% interest of Brookdale SHOP portfolio. Another important step, transformation of the SHOP portfolio.

Our new capital partner is a large sovereign wealth fund. Gross asset valuation is $790 million, which is a yield on sale in the low to mid 6% range before asset management fees. The transaction reduces our pro forma Brookdale concentrations to 6% and improves the age and demographics of our SHOP portfolio. Joint venture will be unlevered. We expect to close by year end. In September, we closed on the sale of the non-core Prime Care senior housing portfolio for proceeds of $274 million. It was an important cleanup transaction and allows us to efficiently recycle capital into our pipeline.

We also reached agreement to sell the remaining 49% interest in our UK portfolio. We expect to close by year end, marking our exit from the UK. We recently reached agreement for the early termination of our nine property master lease with Capital Senior Living, that would have otherwise mature in October 2020. We intend to market to file [Phonetic] non-core assets for sale and the rest of those properties will terminate on the applicable closing dates. We plan to transition the four core properties to existing partners, three to Atria and one to Discovery. Capital Senior will pay contractual rent through the transition date, which should occur in the first quarter.

Our six property master lease with Capital Senior matures in 2026 and has just over $4 million of annual rent is not affected by the transaction. We've now tackled the key challenges in the triple-net portfolio of the Brookdale, Prime Care, Capital Senior, Atria and [Indecipherable]. We also recast our relationships with core partners like Oakmont, Sunrise and Aegis. The reaction was purposeful and strategic. And now emerging ClearView is a far stronger triple-net portfolio.

Our quality assets master lease arrangements with long dated maturities and a rental stream that should consistently grow in the 2% to 3% range each year. You see the transformation visually, take a look at the heat map on page 28 of our supplemental compared to prior periods. Treasury [Phonetic] under way in the SHOP portfolio has been equally proactive, thoughtful and decisive. We have stated previously, due to the timing of all the activity, it won't be until 2021, [Indecipherable] SPP only reflects the transformation of that's been accomplished. We do feel good about the portfolio and platform that we're building.

Wrapping up with yesterday's announcement. I was fortunate to join HCP in early 2018 at such a unique point in the company's history. Fully aligned executive team with a clear vision where they wanted to take the company supported by high-caliber and collaborative team [Phonetic]. Today, I feel even more fortunate to have Tom asked me to take on an expanded role at Healthpeak, company with a differentiated strategy, high quality portfolio and balance sheet, disciplined portfolio management relationships to drive growth. Our new colors are purposeful to help tell the story of our future, black and white show simplicity, clarity, and focus and the final colors goal as we intend to maintain our standards at the very highest level.

Now I'll turn the call back to the operator for Q&A.

Questions and Answers:

Operator

[Operator Instructions] Our first question today comes from Rich Anderson from SMBC. Please go ahead with your question.

Richard Anderson -- SMBC -- Analyst

Hello, team HealthPeak. So just -- OK two questions. Perhaps to Scott, the core versus transition portfolio of the SHOP business kind of flip-flopped in terms of performance in the third quarter, you mentioned the full effect of everything you're doing sort of a 2020 -- 2021 event. Could you describe what are we going to see sort of kind of variability like this through the process? Or was this sort of a one-and-done type thing you'd expect to see core do better than transition, just get a sense of what it will look like over the course of the next year or so?

Scott M. Brinker -- Executive Vice President and Chief Investment Officer

Hey, good morning, Rich. I think there are a couple of things to focus on, one is the law of small numbers. So pool is small, especially over a 90-day period, this is like senior housing, the numbers can jump around quite a bit and become very hard to predict. So that's part of it. The other is that in the core portfolio, almost half of that pool is in Denver, in Houston to markets that have a ton of new supply, just a very competitive environment. Good long-term markets, we're in good areas within those two MSAs, but it's a very compelling market today. And the NOI was down pretty significantly, in fact, in the core portfolio if you take out Houston and Denver, our year-over-year SPP would have been flat instead of down 7.4%.

So the balance of the portfolio is actually performing quite well. It's just those two markets in our properties there given our concentration or having huge outsized effect. So that's what explains the decline in the core portfolio. We think that number will certainly improve moving forward. I'd also note that all the communities in Denver and Houston are part of the portfolio that we are selling a 46.5% share to the sovereign wealth funds.

And then the transition portfolio, it was nice improvement, that's although down 2.7%. That's a lot better than it had been in the previous six quarters or seven quarters and we feel like the fourth quarter should be a positive number, hopefully, materially positive. So, hopefully that gives you some color about the change in direction between core and transition space.

Richard Anderson -- SMBC -- Analyst

Perfect. Thanks. And then second question. I appreciate the color on the CCRCs and protection, the exhibit in terms of competition and the length of stay. But 40% of your SHOP, I think is CCRCs now. Are you comfortable? I mean, obviously, the risk is housing market sort of tenants and you have trouble getting people into the communities. So, to what degree do you see that going down in perhaps in dramatic fashion as you kind of change your portfolio or swap it from triple-net to SHOP in the senior housing space?

Thomas M. Herzog -- President and Chief Executive Officer

Richard, it's Tom. The CCRCs do definitely represent a different model from straight senior housing. The barriers to entry are dramatically different, as you probably know, they're huge properties sitting on lots of acres of infill type land. They appeal to an earlier wave of baby boomers more in the range of 81 rather than 85 for purposes of entrants. They have an 8 year to 10 year length of stay, which obviously produces a better earnings model due to the predictability of those tenants. And we think that with the approach that we've taken to that business that it produces a more stable component to our senior housing business that we like blending against the AL and IL continuum of care products. So we actually really like it.

Richard Anderson -- SMBC -- Analyst

But 40 is the right number or do you see that -- I mean, what's your appetite for other CCRCs, I guess the question and as you go forward?

Thomas M. Herzog -- President and Chief Executive Officer

Yeah, I think that's a fair question. Here's the thing about CCRCs, they don't trade that often, because they're very difficult to put up. I mean, for instance, the new supply hitting the stuff in a 10-year period and a 10-mile radius system, as Scott had indicated, absolutely zero. So there -- and they're in a lot of traded hands. So on quality product it does change hands and now that we've got the infrastructure set up to take advantage of this product type. We certainly would like to purchase some more, but it's not going to be an outsized portion of our portfolio is just going to be one line of business that we have within senior housing. We think it's a good diversification within the senior housing segment to own a portion of it.

Richard Anderson -- SMBC -- Analyst

Got you. Thanks very much.

Thomas M. Herzog -- President and Chief Executive Officer

You bet.

Operator

Our next question comes from Jordan Sadler from KeyBanc. Please go ahead with your question.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

Thank you. Good morning. Just a follow-up to Rich's last question there. Why the cap rates so much higher on these properties? And what is the tail risk as sort of you guys think about it? How should we be thinking about it?

Thomas M. Herzog -- President and Chief Executive Officer

I'll take this one too. The cap rates and the risk, and I'll ask Scott to chime in on this as well. From a risk perspective, one of the things that one has to consider is that the entrance fees oftentimes are paid for by the senior sale of their single-family home. So if there was a dramatic decline in home values and it was prolonged, that could have some impact. Yet the accounting in the way that it is set up amortizes that entrance fee over the actuarial life of the tenant. So that produces a more appropriate matching of income with the services that are required on those properties. So a good earnings pattern that we think to be quite correct.

So despite the fact that does have the risk factor of a downturn in housing, which hopefully would not be long-term. It does produce a strong pattern of earnings that will go through the cycles. And as far as the cap rates where they currently stand, that's where the market is. And there is complexity in setting these things up. The accounting of both actuarial work, Shawn Johnston, our CEO, spent two months, three months working on this around the clock to make sure that we head it right, did a great job of point it together. And now that we've got it all set up and we've studied the business, we've been in the business for a period of years along with our friends Brookdale. We think that it's going to be a great business. Accordingly, the cap rates to me feel like they're a bit high. So I think there could be some compression as we look forward over the next several years. That's my take. Scott?

Scott M. Brinker -- Executive Vice President and Chief Investment Officer

Yeah, there is also not a whole lot of comparable transaction activity to point to on cap rates. So I've seen them anywhere from the 7% to 10% over the years. So it's hard to say that there is a specific market cap rate. I think it's easier to find comparables in the rental senior housing where there's just a lot of activity, which is very rare to see more profit, CCRCs in particular trade, because the vast majority of the product is non-profit, that rarely if ever transacts. So that would be the other comment I would make is that there is obvious comparable cap rate to point you from a transaction standpoint, Jordan.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

So, I've seen to your point, we don't get a ton of granularity on these from a lot of folks, but one of the smaller players in this space public REIT has a significant portfolio. I have noticed there is -- at the operator level, there is a significant resident buy-in liability. I would imagine those sit on these assets as well, just -- those fees essentially that are refundable ultimately upon move out at some rate. Where does that liability set based on sort of now that this JV will be sort of consolidated, is that going to be on HCP's balance sheet? And if so, how big will that be and if not just kind of, it's still curious how big it is?

Thomas M. Herzog -- President and Chief Executive Officer

Yeah. The refundable entrance fee sits as a deferred liability. It's an evergreen liability. In other words, as one resident moves out that refundable liability gets refunded to that senior or their state when the next resident moves in, so it becomes evergreen liability. That numbers about $300 million on our books.

When we think in terms of the non-refundable fee that represents a deferred revenue because there is a future service obligation. And therefore, when you have a deferred revenue that's picked up in purchase accounting appropriately over the remaining actual lives of those seniors, that is amortized into income as a booster to the total income that's earned on that portfolio or that particular property which create -- does create an nice earnings recognition pattern. That liability on the portfolio that we purchased in at the 100% level is that about $400 million. Scott?

Scott M. Brinker -- Executive Vice President and Chief Investment Officer

Yeah, Jordan, I wanted to add one other things that the average total entry fee on this portfolio is only about $200,000. So it's a very modest price point. It really appeals to a wide demographic that $200,000 is below the median home value in these markets pretty significantly. And all entry fee communities are different. Sometimes there are 90% refundable plans or it could be a 0% refundable plan. This portfolio is closer to the 0% refundable, on average of that $200,000 entry fee, only 25% of it is actually refundable and the balance is non-refundable. So this portfolio in our view is pretty unique from that standpoint is that refundable liability is pretty small relative to the size of the asset value. So I think it's important to keep that in mind as well. And as Tom mentioned, it functions more like a security deposit. I mean, there is no interest rate associated to it. It just sits on our balance sheet. So it's one of the complexities of CCRCs and maybe that is one reason that the cap rates are a little bit higher, but we're perfectly comfortable with it, especially given the ability to do it in scale here.

Thomas M. Herzog -- President and Chief Executive Officer

I'm going to add one thing, Jordan, because you've obviously studied these and I don't know, but everybody on the call have the same time. We kind of cap rates that you're speaking to when we did the Brookdale transaction that was in the vicinity of a 10 cap, somewhere in that range and that's based on NOI and the entry fees that are received. But when one breaks it down, let's get down to actual cash flows.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

Yeah, that was my next question.

Thomas M. Herzog -- President and Chief Executive Officer

Yeah. So, well, let's break the cash flows apart. So if we went from, let's just call rough numbers, a 10 cap, it probably on a recurring capex basis to recurring capex, it probably brings it down about an 8.25 cap. And that means we spend a lot of money in these assets, because they have to be kept in tip shape. If we included the revenue enhancing capital improvement type spend, as we have to seek to make these assets along with Brookdale. We have seek to make them to better and better quality, it's probably more in the 7% to 7.5% yield range, but that is with a pretty vast improvement in the quality of the assets. So, again, going from a 10 cap to probably 8.25 run rate yield based on recurring capex and we put a lot of money into the assets, that's probably putting us more in the 7.5% cap rate range. Just to give you a feel.

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

Thanks for all the color.

Operator

Our next question comes from John Kim from BMO. Please go ahead with your question.

John Kim -- BMO Capital Markets -- Analyst

Hello, Healthpeak. Can you -- I think you provided some mark-to-market on the life science that you had this quarter, but I was wondering if you could provide that same figure for MOBs? And also what should we expect for 2020 expiration?

Thomas M. Herzog -- President and Chief Executive Officer

The last part was, what we expect for 2021?

John Kim -- BMO Capital Markets -- Analyst

The 2020 mark-to-market.

Thomas M. Herzog -- President and Chief Executive Officer

Okay. Tom?

Thomas M. Klaritch -- Executive Vice President, Chief Development and Operating Officer

In the past couple of years, we've actually seen the mark-to-market in the MOBs move up. This year, it's been very good. We're in that kind of 3.4% last quarter, 3.2% this quarter. And based on historical numbers and where we've been moving, I would suggest the same kind of numbers next year, 2% to 4% kind of staying in that range.

John Kim -- BMO Capital Markets -- Analyst

Okay. My next question is on the purchase option detail that you provided this quarter. Is the annualized base rent, is that a good numerator for the cap rate that you'll be selling out?

Thomas M. Herzog -- President and Chief Executive Officer

Hey, John. Yeah, that is a good -- it's a good approximate for the numerator.

John Kim -- BMO Capital Markets -- Analyst

Okay. Do you have any indication on what's going to happen with the 2021 option in LA?

Thomas M. Herzog -- President and Chief Executive Officer

On the Hoag Hospital in Irvine, I mean, it's likely to get exercised. So it's on the list here. That's the current assumption right now.

Peter A. Scott -- Executive Vice President and Chief Financial Officer

That's good. I'd say it's likely, but as they continue to work through their plans, if they decide that it's advantageous for them to have more time. We're going to be flexible and open with them and working through that.

John Kim -- BMO Capital Markets -- Analyst

6.5% is that a market cap rate for that asset type in LA?

Thomas M. Klaritch -- Executive Vice President, Chief Development and Operating Officer

Yes. This is Tom Klaritch, that's a good market cap rate for that kind of hospitals.

Thomas M. Herzog -- President and Chief Executive Officer

In asset -- I mean, Hoag, if you're not familiar with Orange County, that's the best health system in Orange County and it's fantastic location in Irvine. So I don't think that's representative of hospital cap rates, but it's certainly representative of such a unique health system and market and location.

John Kim -- BMO Capital Markets -- Analyst

Thanls for the color.

Thomas M. Herzog -- President and Chief Executive Officer

Thanks.

Operator

Our next question comes from Michael Carroll from RBC. Please go ahead with your question.

Michael Carroll -- RBC Capital Markets -- Analyst

Yeah, thanks. Can you discuss the South San Francisco life science market, what type of demand are you seeing at your Sierra Point projects right now? And has that interest changed since one of your peers announced this quarter that they've fully leased their development project that's nearby?

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Hey, Mike, it's Pete. Happy to dig into that. I think as I've said before, South San Francisco is a very important market to Healthpeak. We own 4 million square feet in that market and the current vacancy rate is around 2% right now, which is one of the reasons why you're seeing a lot of new construction. When you think about the new construction, there is about 3 million square feet right now that is getting filled with all the new leases that have been signed, it's probably around two-thirds committed, within that is obviously the Cove Phase IV, which is a 100% leased, the shore Phase I which is a 100% leased. And also within it is the shore Phase II, we're not at a point yet where we're ready to give any additional information on that. But I think you can glean from the demand within that marketplace that we feel very good about the prospects of the shore Phase II.

We're going to continue to focus on life science tenants. I know there's been some activity with non-life science tenants in that marketplace, which when something get leased out to a non-life science tenant that's actually probably a good thing for us. Since our core focus is on life science users and that's where our core competency is.

So we feel quite good about that marketplace and we think all these projects will do well. And we feel very good about our positioning with the shore Phase II.

Michael Carroll -- RBC Capital Markets -- Analyst

Great. I know we discussed this a little bit last quarter, but I know you have some land sites still in South San Francisco. Is there a point where you would want to bring forward some of those projects and break ground on another one?

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Yes, that's a good question, Mike. We actually have a lot of land opportunities in life sciences both within South San Francisco, but also in San Diego, as well as Boston. If we had to prioritize where we are today within South San Francisco we'll continue to build out the shore Phase II as well as the shore Phase III. That's our focus right now. I think as you look at San Diego, we would probably prioritize our Science Center Drive project down there ahead of some of the other projects in South San Francisco right now, just given that we have a decent pipeline ongoing currently. And then in Boston we have our 101 CambridgePark Drive opportunity. We're into the city of Cambridge right now trying to seek our site permits and we're going as fast as we can there, but we feel quite good about how we're positioned in, in that West Cambridge market with 101 there. So our priority is probably 101, as well as Science Center Drive finishing up the shore phases II and III and then to the extent that there is still significant demand, we'll start to assess those other land parcels in South San Francisco. Tom, you want to add anything?

Thomas M. Herzog -- President and Chief Executive Officer

Yeah. Few things that I would add is as we look at any new developments, one of the things we consider and do a lot of work around is the demand supply fundamentals. We look at the amount of pre-leasing that's taking place not just within the market but within our own properties. We look hard as to how we would match fund those investments with non-core sales, in fact, this happened to be a topic with our Board meeting a week and a half ago, where we did a full deep dive on that.

So we like our prospects. We like what's coming down the pipe. We do have some of these projects that Pete just mentioned that fit very neatly into our clusters, and therefore that represents additional opportunity for us in the way clusters work with biotech tenants and the like. So we like our play, but we're also going to continue to approach it with a degree of caution, while still seeking to take advantage of the opportunities that we have.

Michael Carroll -- RBC Capital Markets -- Analyst

Great. Thanks.

Thomas M. Herzog -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from Vikram Malhotra from Morgan Stanley. Please go ahead with your question.

Vikram Malhotra -- Morgan Stanley -- Analyst

Thanks for taking the question. Just first on senior housing SHOP. We've now had the three large healthcare REITs report, there has been a range of results and views. I know you guys gave some thoughts longer-term at NAREIT. I'm just wondering specifically on SHOP, Scott, if you could give us a sense of two things: one, how did occupancy trend for maybe just the multiple pools, but just some of the pools to get a sense of how things are shaping up going into 4Q. And then what sort of the range of pricing power that you saw exhibited across all your partners?

Scott M. Brinker -- Executive Vice President and Chief Investment Officer

Hey, good morning, Vikram. So I'll comment on the entire SHOP pool. So year-over-year, the occupancy was down about 70 basis points, but sequentially in the third quarter it had actually moved up quite nicely. And if you look at where we were on January 1st of this year versus where we're at today, the first five months of the year, we declined about 100 basis points. And the last four months of the year, we increased about 100 basis points. So we're basically right back to where we started on January 1st in the SHOP SPP portfolio, which is pretty good actually. So that's where we're at on occupancy. The recent trend has actually been quite positive, obviously, up 100 basis points over the last four months to five months.

And then on rate, I think it's more appropriate to talk about the two pools separately because of the core portfolio, which is the more stabilized of the two, the year-over-year RevPAR is up 3.5%, 4%, so actually it's been quite strong and continues to be the transition portfolio the year-over-year growth rate is slightly negative. And I think there are a couple of things there, one is we do have a number of well occupancy properties within that pool. We're one of the operating partners has been more aggressive on rate to improve occupancy, which is bringing down that average is just a small pool, again the log numbers. The other thing that's happening in that pools that the acuity level is declining. Brookdale is just around a higher acuity level then Atria and that's the vast majority of that pool. So the RevPar which is in all-in rate including care is naturally going to decline a bit, when the acuity comes down. So I think that's a factor as well, Vikram.

Vikram Malhotra -- Morgan Stanley -- Analyst

Okay. That's helpful. On the JV with the sovereign wealth fund. I'm sorry I missed this. It's -- I think 2.30 [Phonetic] a unit. Did you give the cap rate on that?

Scott M. Brinker -- Executive Vice President and Chief Investment Officer

We did Vikram. It's in the low to mid 6s, before the asset management fees.

Vikram Malhotra -- Morgan Stanley -- Analyst

Okay. Low to mid 6s. And then maybe just one for Pete. There is a lot of changes, obviously, over the last two quarters. I know you will eventually give us 2020 guidance, but just sort of looking to get a sense of some of the bigger moving pieces as we go into 2020, given that there have been so many changes that have gone on over the last two quarters. If I look at sort of consensus numbers, it seems like sort of a $0.45 -- $0.44, $0.45 run rate throughout the next year. Just wondering, if you can talk about some of the bigger moving pieces we should be aware about as we update our models?

Thomas M. Herzog -- President and Chief Executive Officer

Vikram, it's Herzog here. I'll take that one. Pete, I want to do that. Okay. So we do expect to have more normal earnings growth going into 2020. As you know, we still got the fourth quarter in front of us and we're in the midst right now of our annual operating plan that we'll present to our Board in December. But I will share with you some directional thoughts based on where we stand today as long as you recognize that our full-year guidance is not going to come out until February, which is our standard practice. So given that, I'll just give you guys a rundown and you can use it as you do your modeling and such there with MOBs. MOBs are primarily on-campus for our portfolio as you know, there has been a steady performer for the last decades plus consistently have operated in the 2% to 3% range. In 2019, when you look at our numbers, we did benefit some from the outsized growth in Medical City Dallas, which brought our SPP to the upper end or maybe a little above the top end of our typical range. And as we look at 2020, I think we can't assume that that additional add rent continues to grow although it might, but we're not going to forecast that. So I would probably say somewhere in the low to mid-2s for MOBs.

Going to life science, the fundamentals remain very strong right now. We continue to see near-term upside. Our positive mark-to-market is in the 15% to 20% range. That is in our portfolio. We've got healthy lease escalators. As I think you know. So if we were going to swag a number for purposes of this call, I would say, growth in the 4% to 5% range. And let me caveat that for a moment. You guys realize, we used a cluster strategy which is vital in the three core life science market and we've got strong scale in these markets. And that combined with the significant development platforms that we have that we're delivering on heavily in 2020 and 2021, it gives us the ability to proactively collaborate with our tenants to meet their space needs as they grow, which has been a common thing we've done with our tenants. We have a lot of development coming online. So what this means is, we will have certain tenants that have smaller space that want to grow into bigger space, which would move from one of our SPP properties into one of our non-SPP properties, primarily lease-up of development.

We, in fact, we've seen a few fairly significant tenants that are taking these exact moves that we've signed letters of intent and that's the core of the shore, we might have some of that stuff going on to Boston we'll see, and it's absolutely a positive to our earnings and is the right economic move but can be negative in the short term to SPP due to the downtime we have been repositioning that vacant space for new leases. So it's a really good thing for the company, we get this blip in the metric of SPP. So Pete and Brinker and I and the senior team have been talking about how to best present that as we go into 2020, economics are going to be great, we'll figure out that metric and whatever the most appropriate way to present that. But bottom line is life science looks great. The real growth is in a 4% to 5% range.

And it takes us to senior housing, that's our triple-net, that's easier. We've dramatically overhaul that triple-net portfolio, Brinker talked to that. Take a look at that hear chart and go back a few quarters as he indicated, it's in the sub. It's dramatic when you look at it. And -- but we're looking for that business to have same-store growth at 2% to 3%, long dated leases, good credit. So that business looks great.

Let's go to SHOP. SHOP makes up 15% of our total pool, but 10% of our SPP pool, some of our best assets will come into the pool over the next year, year-and-a-half. So they're not going to be in 2020 SPP. So back to SHOP SPP we ended about 10%. So consistent with the previous views that Scott provided, we believe we've got an operating environment that is going to be choppy in 2020, but we expect to see steady improvement going forward. And we have worked really hard to remake the SHOP platform to favorably position it for our portfolio, the work done to date it's been dispositions, transitions, recycling of capital into higher quality assets, which we think will be rewarding in the direction that we want to move. And for 2020, our same-store pool is going to remain very small. And the highest-quality assets won't even be in the pool until 2021.

So given all that and above -- I will just make a statement, SHOP is inherently difficult to forecast for everybody out there. And especially when you have a smaller pool and you've got transition. So we'd like to see Q4 play out, we have that information in hand and on SHOP I think we'd probably want to wait until February and give us our best guidance at that date and the SHOP or again, which represents 10% of our SPP pool.

I'll go a little further to your question.

Vikram Malhotra -- Morgan Stanley -- Analyst

Sorry, go ahead.

Thomas M. Herzog -- President and Chief Executive Officer

On external growth, our development pipeline is going to produce some really positive impact from an FFO as adjusted perspective, we're talking probably $0.04 a share, just from what earns in. And you'll also see earn-in from 2019 accretive acquisition activity, it's going to be successful, which we think there's a good chance that we will have some upside there. We won't forecast to it, but we do feel good about that. But at the same time there will be some offset that I think you guys probably have in your models. If you don't, make sure that you talk to Barbat and Andrew and the guys here. But there is going to be some rollover impact on some of the late 2019, for instance, the Prime Care sale that we made, that was a great sale, a cleanup sale came with a bit of dilution. The UK venture disposition came with a little bit of dilution. We're going to have the normal annual pruning of our non-core assets. We're going to do that forever. This assume we're going to sell $300 million of older tired asset every year and recycle that into development.

We've got the North Fulton Hospital purchase option, Pete mentioned that we've added a new schedule, we wanted to make sure you guys [Indecipherable] an $82 million purchase option that is rough starts about a 10% cap rates, a little bit of dilution there. But given all this factor, I think what your original question is we expect to move back toward a more normal earnings growth beginning in 2020 for some potential positive or negative noise from the senior housing transitions and some of these new acquisitions that we still when there is some lease-up required for stabilization. But we'll come back to you with more specifics on the fourth quarter call. So that's what I'm willing to tell you on the 2020.

Vikram Malhotra -- Morgan Stanley -- Analyst

That's actually very helpful. Thank you so much. And I would agree with you on the triple-net site, even your metrics on the amount of new supply, the median household income and the median home value, they all jumped as well. So definitely agree with you.

Thomas M. Herzog -- President and Chief Executive Officer

Thanks.

Operator

Our next question comes from Joshua Dennerlein from Bank of America. Please go ahead with your question.

Joshua Dennerlein -- Bank of America Merrill Lynch -- Analyst

Hey guys, thanks for the question. Curious on the Brookdale SHOP JV that you created this quarter. Why not just sell those assets outright? And then maybe could you talk about their performance versus your overall SHOP performance? And maybe the impact on your SHOP pool today and in the future how you might present that?

Thomas M. Herzog -- President and Chief Executive Officer

Yeah. We don't want to call out a specific performance of that portfolio. Although I did mentioned that Houston and Denver are a significant part of the core portfolio and that the balance of the core portfolio was actually flat year-over-year versus down 7.4%. So I think that gives you at least directionally an indication of how that portfolio was performing. The decision to do a JV rather than sell the assets outright was a couple of things, one, it's a new capital partner that we've been talking to you for a good period of time that over time we think could be an excellent strategic partner on any number of opportunities. So there was a mutual desire to establish a partnership. It may never grow, it may grow significantly. We'll see based on the opportunities. But that was an important consideration for us.

And the other is that, over time, we think these are going to be good assets. For the next couple of years, we think it's going to be more challenged because of the markets that they're in, unfortunately the sovereign wealth fund, there are some benefits to being private, they're able to take a long-term view, which they do. We're able to take a long-term view, but only to a certain extent and we needed to manage the portfolio accordingly. So we think that over time this will be a very good portfolio for a couple of years, it probably will be more challenge. And we thought this was strategically and economically the right thing for us to do with the assets.

And Pete you wanted to --

Peter A. Scott -- Executive Vice President and Chief Financial Officer

And then, Josh, let me try and answer your question on SPP, speak up, as we've been told that there is some sound difficulties. First time I've been told that I'm too quiet. So from a SPP perspective, our policy is to remove JVs from SPP, so if the deal does close in the fourth quarter, it could have a material positive improvement on our reported numbers. Importantly, and this is very important, our current guidance does not assume these assets come out of our full year pool and we will be transparent in the fourth quarter on the impact of these assets and show it both with and without these assets included.

Thomas M. Herzog -- President and Chief Executive Officer

I'd just add one thing to that, Peter, if I could. As we go into 2020, we will be assessing whether to show these types of JVs on a pro rata basis going forward, because when we get some larger JV's like this it just feels like there's assets messing up, we probably -- we would like to report on. I'm sure, you'd like to have information. So we're working on that.

Joshua Dennerlein -- Bank of America Merrill Lynch -- Analyst

Thanks guys. That's it from me.

Thomas M. Herzog -- President and Chief Executive Officer

Thanks.

Operator

Our next question comes from Chad Vanacore from Stifel. Please go ahead with your question.

Chad Vanacore -- Stifel Nicolaus -- Analyst

Hi, good morning. This is [Indecipherable] on for Chad. Congrats on the rebranding. And my first question is on the SHOP performance. It looks like occupancy has improved quarter-on-quarter across the board. Given the competition, you mentioned, Denver and Houston in your core portfolio, did you offer more concession in the quarter to defend occupancy? What is the outlook for 4Q and going forward? And how should you think of occupancy versus rate increases in the choppy market that you just mentioned in 2020?

Thomas M. Herzog -- President and Chief Executive Officer

Good morning. So there wasn't as much price concession, as there was increased marketing spend, so that's one reason that the year over, well, actually the sequential performance was a bit weaker, so not significant discounting, it was more capital into the buildings as well as elevated expenses to improve the marketing effort, including new salespeople.

Chad Vanacore -- Stifel Nicolaus -- Analyst

Okay. And my second question is on dispositions, you just mentioned the plan to like recycled $300 million assets annually as a normal run rate. So other than the 18 triple-net assets you are selling to Brookdale, are there any major portfolio dispositions that are in the works near term?

Thomas M. Herzog -- President and Chief Executive Officer

No, nothing dramatic. It's more just typical [Indecipherable].

Chad Vanacore -- Stifel Nicolaus -- Analyst

Okay. That's it for me. Thank you.

Thomas M. Herzog -- President and Chief Executive Officer

Thanks.

Operator

Our next question comes from Nick Joseph from Citi. Please go ahead with your question.

Michael Bilerman -- Citigroup -- Analyst

Hi. It's Michael Bilerman here with Nick. So I just wanted to come back to the joint venture. And Scott, you mentioned and Scott, you mentioned a low-to-mid 6 cap along a total portfolio value of $790 million, which equates to a total NOI of that $49 million. And then the other piece that you sort of talked about was that it included the assets in Houston and Denver that if were excluded from the SHOP pool, you would mean it would be flat. So if you were to look on page 34 of your SHOP in the third quarter right, there was just $14.6 million of cash NOI, that was down 7. So half of that is Denver and Houston down, let's call it 15 to make the math simple. How does that all tie out to a -- what's embedded to about $49 million NOI and 16 [Phonetic] quarter cap on $790 million of value. I'm just trying to piece it all together, maybe the cap rates on the different NOI number versus what's in the place. Maybe not have -- maybe there's other assets outside of what is in here. Can you just sort of tie it altogether?

Thomas M. Herzog -- President and Chief Executive Officer

Yeah, I'll try to and maybe a follow-up call would be helpful to just to walk through all the details. But the assets that we are selling to the sovereign wealth funds are doing a JV, not all those assets are in the SPP pool, because there are some that are actively being redeveloped. So they're not in SPP. And then if you look throughout the supplemental when you see the SHOP asset count for Brookdale, that also includes a number of assets that are held for sale. So there is a population difference that I think is maybe driving some of the confusion, but you're correct on the roughly $48 million, $49 million of NOI over the $790 million purchase price.

Michael Bilerman -- Citigroup -- Analyst

But what is that NOI, is that a current in place reported 3Q number arguably a part of that? It sounds like under redevelopment of part of that where you had significant NOI weakness? Or is it, what is forecasted for next year is a trailing 12 months? What does that $49 million represent?

Thomas M. Herzog -- President and Chief Executive Officer

Yeah, it's a T12. Michael, the T3 annualized would be more like high 5s to 6%, and the forward-looking cap rate, I'll probably let sovereign wealth fund comment on that as we'll give our view when we give February guidance.

Michael Bilerman -- Citigroup -- Analyst

But that's an important number, at least from a 3Q annualized, because that's the NOI, we got to pull out of our model in which case it's going to be less dilutive, if it's in that 5 to 5.5 range versus 6 to 6.5. The other thing, and it was really helpful, Tom, as you walk through a lot of the elements of next year coming from this year, you had life storage -- storage company come out and give 2020 guidance. Actually a lot fewer companies give 2020 now, like BXP and a few others. Would you consider, you have a big conference coming up with NAREIT in a few weeks, maybe putting more of those building blocks together, so you can give a little bit more color to the Street versus waiting for February?

Thomas M. Herzog -- President and Chief Executive Officer

Michael, I thought about that and I must say if -- I've got a past in other sectors. We're one that dealing with a single sector. When you start dealing with multiple sectors, it becomes much more complex as you can imagine. And I will say the senior housing sector is a far different animal to forecast than the others that have ever dealt with. And so we almost need to see how the year completes out to get a feel for the fourth quarter. See how January looks before we set guidance for the year, because there are so many moving parts and even the moving parts despite the difficulty in the transitions, it comes down to -- think in terms of assets that are often at 15%, 20%, 25%, 30% margins. Smaller changes in the NOI, it could be rents, it could be expenses, a variety of different things can cause some pretty dramatic changes in the numbers, and that's especially true when we have a small pool like we have in SHOP .

I was -- what I worry about in SHOP, yes, that we can have a change that is literally immaterial to our outcome for earnings for the year, but it can swing this metric that seem so exceedingly important to the Street, because I know that they're comparing us to certain peers where it's an enormous number in their portfolio. And so we have a tenancy to want to get enough time to model it as best we can to get good estimates on that number, it would be hard for us to come out with full guidance. Early when we've got the SHOP number that we want to dial in as best we can. So I'm inclined not to come out with specific guidance at NAREIT, but rather get the directional guidance as we can, like I just did and then dial it in in February.

Michael Bilerman -- Citigroup -- Analyst

Listen, I agree with you on same-store, there is way too much focus when all three view calculated different way. I mean, Welltower doesn't calculated the same between their SEC filings and the supplemental. Where do you stand, at least, trying to come together. You know, the industrial REITs came together 24 months ago, to at least agree to a common definition on same-store, is that something that you feel you can do, that there is willingness to do?

Thomas M. Herzog -- President and Chief Executive Officer

Yeah, Michael, it's something that we would gladly do, but it requires all parties to want to come together and come to a common definition. So if we find that our peers want to do the same, we will be the first to sign up.

Michael Bilerman -- Citigroup -- Analyst

Last one, just on same-store. I guess, you must have listened to the Welltower event of this call. I'm sure, Scott, listened to Welltower, because he had some really nice comments [Indecipherable] on it. But from the same-store perspective, where do you lean in terms of the description of the sale of the senior housing operating environment, overall?

Thomas M. Herzog -- President and Chief Executive Officer

Yeah, Michael, I guess we would be somewhere in between --

Michael Bilerman -- Citigroup -- Analyst

What did you say, I can't hear you that well and you're very distant.

Thomas M. Herzog -- President and Chief Executive Officer

Michael, I would just say the industry environment is generally in line with what we've been talking about for the past two years, so it's challenging. Certain markets are better positioned than others, certain operators are better positioned than others. We're starting to see modest signs of improvement in more markets than we would have a year ago. In general, our portfolio is performing in line with what we expected at the beginning of the year, even though it's a really small portfolio and hard to forecast. So our view hasn't changed on industry fundamentals. We didn't see any dramatic change in the third quarter, but that doesn't mean that somebody else did and it's a very local business, especially, if you got transition assets in the pool that I certainly wouldn't disagree with any comments that were made by anyone else. But we can't comment more specifically on what we're seeing as well as the conversations we have with operators, you have bigger footprints.

And I would just say, our view is that it's challenging, it's been challenging, things are getting better, but it's going to take a little bit more time to improve, at least, at a national level. There are certain pockets that are doing extremely well already, Oakmont is a great example, Aegis is a great example. So there are sub-markets and operators that are making a lot of money right now and would be confused by anyone talking about a challenging operating environment and then there are others at the exact opposite end of that spectrum, particularly in smaller markets with older assets in particular, if you're in the middle of the transition. So I think it requires a lot of nuance about what portfolio you're talking about, it would be best to avoid sweeping generalizations about senior housing.

Michael Bilerman -- Citigroup -- Analyst

Right. Okay. Thanks for the time.

Thomas M. Herzog -- President and Chief Executive Officer

Thank you.

Operator

Our next question comes from Steven Valiquette from Barclays. Please go ahead with your question.

Steven Valiquette -- Barclays Capital -- Analyst

Great. Thanks. Good morning or good afternoon, Tom and Pete and Scott. Congrats on your continued life science strength which is pretty important. But unfortunately I also have a question on senior housing. Just a follow-up further around the discussion on performance in the SHOP core versus transition portfolio. Your comments around Denver and Houston were helpful. But when you look at it, in the revenue growth trends, year-over-year we're actually fairly comparable between the core versus transition portfolio. And instead, to me, it was really the operating expense growth that kind of jumped out, I think it was higher at around 5% in core versus only 1% the transition portfolio. So I'm not sure if that was related to the acuity differences that you alluded to earlier in the Q&A. But I guess the question really is with the overall industry discussion around rising labor costs and other expenses. Is there any extra color you can provide about initiatives that you and your partners may have to try to control operating expenses that within the overall SHOP portfolio? Thanks.

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Yeah. happy to take that one. As part of the gap between the transition in core portfolio on expenses is that last year we talked about some of the transition assets having disproportionately high operating expenses during the transition, whether it's repair and maintenance or over time or contract labor, so that started to reverse a little bit. So that's one reason that the growth in operating expenses in that transition portfolio. This year is lower than what you're seeing in the core portfolio, because the cost of labor, I think you've seen this pretty consistently among the other healthcare REITs as well as the publicly traded operators. It's in the 4% to 5% range in most markets and that was true of our core portfolio and true of our transition portfolio. So it was really expenses outside of labor that we're driving most of the difference in operating expenses between the two pools this quarter.

Steven Valiquette -- Barclays Capital -- Analyst

Is there any hope to kind of bring that expense level down to pay some initiatives or you kind of stuck with costs or expenses growing in that 4% to 5% range that we just talked about?

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Yeah, I wouldn't say that your stock at the same time, seniors are moving into these communities with an expectation of a certain service level and it requires a lot of human to human interaction and that's not something that we're willing to compromise. So any consideration around cutting expenses, but at the expense of the service level that's really off the table and it's a competitive labor market. And at the end of the day, usually companies with the best employees end up having the best performance and the senior living community is no different, so you have to pay a competitive wage to get a high quality worker. Now at the same time, if there is a strong culture, good development opportunities, etc., you have a better chance to have less turnover and attract a more talented workforce, and that's really the emphasis. Now longer term, there chances for technology to reduce the amount of personnel needed at the community. Yes, I think that's the case, but I wouldn't say that there is a dramatic opportunity on that front in the next year or two.

Steven Valiquette -- Barclays Capital -- Analyst

Okay, got it. Okay. I appreciate the color. Thanks.

Operator

Our next question comes from Drew Babin from Baird. Please go ahead with your question.

Drew Babin -- Robert W. Baird & Co -- Analyst

Hey, good morning. Just a couple of quick ones from me. The capital senior properties that are the ones that are flipping over to RIDEA, I know when this happened with Sunrise. I think their rent payments were subordinate to capital spending and so, there wasn't really a noticable uptick in capex from HCP's perspective. With these properties, are you going to see kind of a noticable increase in the amount of capex that HCP is responsible for. If you could just going to talk about the structure there?

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Sure, Drew, I'll take that. So it's four assets those will probably transition in the first quarter of 2020. They're good properties and we think good submarkets, I think it's more likely than not that all four of those will end up being redeveloped. There are 25-year-old properties. Under a triple-net lease over time, the amount of capital reinvested into the property is not always as significant as you might want. So I think it's more likely that those would move into the redevelopment pool, in which case, it's a different type of spending and then capex that would be impacting earnings.

Drew Babin -- Robert W. Baird & Co -- Analyst

Okay. That makes sense. And then just one more from me, the Bradenton CCRC that ultimately Healthpeak will be buying. What was the reasoning for bringing that one in? What changed in the deal, or if you just give a little more color on that? I'd appreciate it.

Peter A. Scott -- Executive Vice President and Chief Financial Officer

It was nothing more than valuation. So we've been talking to Brookdale about this portfolio for a long period of time. And there was a disconnect on that particular property about the right valuation that did not get resolved by October 1st, but we subsequently we're able to come to agreement on the right valuation for that asset at a price that we were a willing buyer and they were a willing seller and LCS is excited to take it on as well. It fits very nicely within the Florida geographic footprint for that portfolio. So we think it's a nice add.

Drew Babin -- Robert W. Baird & Co -- Analyst

Great. That's all from me. Thank you.

Thomas M. Herzog -- President and Chief Executive Officer

Thanks.

Operator

Our next question comes from Daniel Bernstein from Capital One. Please go ahead with your question.

Daniel Bernstein -- Capital One Securities -- Analyst

Hi, I just wanted to ask, go back to the comment you made on additional land at the CCRCs and just generally given the impressive restructure of the portfolio and where the starts have been in CCRCs and maybe senior housing generally coming down. Do you see some additional opportunity to ramp up your construction development seniors housing and maybe to what extent would you do that?

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Yeah, it's not going to be a steep ramp-up on that as a long-term owner, we think there's substantial long-term opportunities. There is one active project under way and that virtually every campus there is some level of expansion opportunity. As an example of the projects that were under way with already the independent living portion of the campus, which is usually two-thirds to three-quarters of the total units are in very good condition, they've been reinvested in over a period of time, but the community has a very tired healthcare unit. There is no memory care provision. The assisted living in studio apartments. The skilled unit is semi-private occupancy and this is the campus with 50 acres of land. So there is the ability to construct a brand new assisted living communities as well as memory care and create private units for the skilled nursing.

So today it's a property that you walk in the independent living and it's fantastic and then you see the healthcare component of the campus and it's not much to talk about. So there is really an opportunity to dramatically change the healthcare side of that campus. So that just one example of the type of project that you can do when you've got 600 acres of land.

Daniel Bernstein -- Capital One Securities -- Analyst

Okay. And then just one last question, you've done some recent private equity sovereign wealth fund transactions in the MOB and senior housing space. Do you see any opportunities in life science to expand that -- expand those opportunities as well?

Peter A. Scott -- Executive Vice President and Chief Financial Officer

There is certainly plenty of interest but, Dan, one of the things Tom talked about before is our cluster strategy and our ability to allow tenants to grow within the portfolio as they have success that becomes more challenged as you start joint venturing different campuses and moving tenants from perhaps a wholly owned campus to a joint venture campus or vice versa, so to date we have not done any joint ventures within the life sciences space and that's the primary reason why.

Daniel Bernstein -- Capital One Securities -- Analyst

Okay. I appreciate that. That's all. Thank you.

Operator

Our next question comes from Tayo Okusanya from Mizuho please go with your question.

Omo Tayo Okusanya -- Mizuho Securities -- Analyst

Yes, good afternoon. Again congrats on the name change. Hopefully, it's the start of a bigger and better things. As we start to think about 2020, again, just along the lines of the CSU questioning, there are a couple of other operators to win lease coverage kind of remains weak as we start thinking ahead of 2020. Should we be kind of throwing some kind of consideration around lease restructuring, around some of those names as well?

Peter A. Scott -- Executive Vice President and Chief Financial Officer

No, I don't think so Tayo, I mean, the vast, vast majority of the triple net rents now is with Brookdale, Ageis and HRA and those are now very long term master leases with improved credits. There are a couple of, I'll call them "cats and dogs" that has very little amount of rent, all of them have corporate guarantees. S -- and I think we're more likely to just collect the rent through the maturity date, if we did choose to do something earlier, which is not our expectation. Today, the amount of rents from those properties is so insignificant that it wouldn't even be a blip for earnings.

Omo Tayo Okusanya -- Mizuho Securities -- Analyst

Got it. So that's number one. And then number two, Tom, I'm not trying to show you the door anything but with the promotion of Scott, I mean, what kind of signal are you really trying to send us just around maybe succession planning at this point?

Thomas M. Herzog -- President and Chief Executive Officer

Well, I think I don't want to answer this one, Tayo, by the way welcome back. Good to have you.

Omo Tayo Okusanya -- Mizuho Securities -- Analyst

Thank you. I appreciate that.

Thomas M. Herzog -- President and Chief Executive Officer

Here's my thinking, Tayo. Don't read anything into that. It wasn't so long ago that I thought of a 57 year old -- an old guy, but as far as CEO's goal, I think it's relatively young guy, near as I can tell. So near as I can tell. So I expect to be around for a lot of years. I'm looking forward to working with Scott and partnering with him and I think that's going to be for many years to come. So don't read anything to that and into this promotion at all. Other than I think Scott is going to be able to help us run this business even better by bringing under one extremely talented person, the overall oversight of our three businesses along with the transactions. So that has been headed up by one person. And that was the sole rationale for it as well as that allow Scott to continue to grew himself for bigger things going forward.

Omo Tayo Okusanya -- Mizuho Securities -- Analyst

Okay, great. Thank you.

Thomas M. Herzog -- President and Chief Executive Officer

Thank you.

Operator

[Operator Instructions] Our next question comes from Lukas Hartwich from Green Street Advisors. Please go ahead with your question.

Lukas Hartwich -- Green Street Advisors -- Analyst

Thanks. Just one left for me. Can you provide an update on the tenant interest level at 75 Hayden?

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Sure. It's Pete here Lukas. So one of the interesting things about 75 Hayden is we actually had to build a parking garage first before we could begin construction of the steel that has been completed. Fairly recently steel has gone up and in fact, we just had the topping off event a few weeks ago. We think we're really well positioned with 75 Hayden vis-a-vis the market fundamentals there. So similar to the shore Phase II, nothing to report today, but we feel very good about how we're positioned. And we're looking to deliver that basically a year from now. So we're right in that sweet spot where we think we can get some leases signed.

Lukas Hartwich -- Green Street Advisors -- Analyst

Great. Thank you.

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Thanks, Lukas.

Operator

And ladies and gentlemen, at this point, I'm showing no additional questions. I'd like to turn the conference call back over to management for any closing remarks.

Thomas M. Herzog -- President and Chief Executive Officer

Well, thank you operator and thank you for all joining us on the call today and your continued interest in Healthpeak. We'll look forward to seeing many of you at NAREIT, and talk to you soon.

Operator

[Operator Closing Remarks]

Duration: 85 minutes

Call participants:

Barbat Rodgers -- Head of Investor Relations

Thomas M. Herzog -- President and Chief Executive Officer

Peter A. Scott -- Executive Vice President and Chief Financial Officer

Scott M. Brinker -- Executive Vice President and Chief Investment Officer

Thomas M. Klaritch -- Executive Vice President, Chief Development and Operating Officer

Richard Anderson -- SMBC -- Analyst

Jordan Sadler -- KeyBanc Capital Markets -- Analyst

John Kim -- BMO Capital Markets -- Analyst

Michael Carroll -- RBC Capital Markets -- Analyst

Vikram Malhotra -- Morgan Stanley -- Analyst

Joshua Dennerlein -- Bank of America Merrill Lynch -- Analyst

Chad Vanacore -- Stifel Nicolaus -- Analyst

Michael Bilerman -- Citigroup -- Analyst

Steven Valiquette -- Barclays Capital -- Analyst

Drew Babin -- Robert W. Baird & Co -- Analyst

Daniel Bernstein -- Capital One Securities -- Analyst

Omo Tayo Okusanya -- Mizuho Securities -- Analyst

Lukas Hartwich -- Green Street Advisors -- Analyst

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